ANDY LEES: Well, good morning. It’s a fantastic time to be in the infrastructure business. The infrastructure business for Microsoft is one of our largest, and also one of our fastest growing, businesses. Since we first launched Windows NT in 1993, seems like quite some time ago now, our foray into the Windows Server business, but also the associated businesses of management, things that we’ve been doing with development tools on the server.

In fact, over the last five years, you can see the growth rate view that we have in our business. This fiscal year, or the one that’s just finished, was a phenomenal year for server and tools. In the first three quarters, we did $8.3 billion worth of revenue. In our last quarter, we haven’t yet announced the results, we provided guidance that we would grow between 17 and 18 percent for that final quarter. And really the amazing thing is that we’re growing across all the businesses inside the server business, whether that is developer tools and what we did with Visual Studio 2005 with the introduction of the lifecycle tools. SQL Server 2005 has been a phenomenally successful launch for us, if you remember, we launched that on November 7th last year, and since then we’ve been growing at more than 20 percent since we’ve launched each quarter. Phenomenal results.

The reason I’m telling you this is because for every dollar that we make in server and tools, on average, you make $6 in the services that you provide around them. And also, when we get through with our business, not only are we aiming to be even more successful, we have lots of opportunities with SQL Server still to grow a lot, and we’re going to talk a bit about that. We’re also going into new businesses, broader businesses, security and management, so there is even more opportunity for you as we go through the next 12 months and beyond.

Our value proposition really is simple. It’s targeting IT professionals and developers, and you have to appreciate that they’re living in this world of 70/30, so there is more pressure today on IT than there’s ever been before. Kind of good pressure and bad pressure. The bad pressure is all the pressure that they have to keep the systems up and running. They have pressure to reduce costs in order to deal with security issues, in order to meet regulatory compliance, and to make sure at the same time they’re reducing costs. The good pressure is that the requirements that the business has, and the impact that IT can make on the business, has never been stronger. And as a result, that’s created an ever growing backlog of projects that IT has.

It’s kind of depressing that today 70 percent of IT resources are spent maintaining existing systems. Less than 30 percent is adding new capabilities to the business. Customers are in break, fix, repeat, break, fix, repeat. So, we think we can help them with that. And that really is what our value proposition is all about IT professionals and developers.

Steve yesterday talked about how Microsoft is really gearing up to help people throughout their businesses, and as IT professionals and developers, they want to make sure that the information workers are successful, and the business people in their business are successful, and we also want to make sure IT professionals and developers are successful in their own right.

Well, for us, that comes to four main areas, four promises that we have to IT professionals and developers. The first one is that we ought to provide them with software solutions that manage the complexity for them, allow them to really focus in on the things that they need to do to add business, and reduce cost. This is particularly centered around what we’re doing around management tools, and how we’re enabling them to automate the whole network and the whole data center.

The second area is how they can protect information and yet provide controlled access. If you think about it today, even you who are here at the conference, you may be thousands of miles away. You still want access to all of your information. You want access to your e-mail, you want access to your files, you want access to your line of business solutions. Many of you are helping customers do direct connection to their suppliers, doing supply chain integration, or enabling systems to connect together between your customers and their customers. This means that there’s a need to open up systems, and as a result that can open up more vulnerabilities. So, IT professionals really have to deal with the security issues that are around, which is why the second promise is all about security.

If you do the first two, that should free up the resources, and it frees up the resources to do two really important things. The first one is advancing the business with IT solutions. This is all around line of business solutions, solutions that you often develop for your customers. What we aim to do here is to provide you the tools so that you can as quickly and as easily develop the solutions that your customers require, making your service dollars work harder for your customers.

And then the fourth promise is all about helping customers amplify the impact of the people, their employees, making them more productive. Clearly Chris Capossela and Mike Sievert yesterday talked about some of the great things we’re doing with Office 2007 and Vista. And behind the scenes, the IT people need to make sure that they’re running, and they’re providing the infrastructure so that they can be deployed and utilized as effectively as possible.

So, this is really the foundation of what we’re going to be talking about today. And, indeed, the promises of that being behind a long-term technical roadmap that we’re delivering over the next three to five years. So, you’re going to see these four promises a lot when we’re talking to IT professionals and developers.

Windows Server Family

One foundation element, of course, is Windows Server itself. And really we’re on a roll here. There’s some very important market forces in play. If you look on the top left-hand side, it shows you today around about 65 percent of all new servers are deployed running Windows Server, and that has been steadily increasing over the last 10 years or so. In fact, what we’ve seen is, although we’ve been growing against NetWare, we’re seeing this switch that’s taking place between Linux and UNIX. However, that whole area, we think, is subject to change. There have been some interesting research that’s just taken place, and for the first time we’ve seen on the top right that the preference of partners, of value-added service providers, has actually gone down for Linux. And we’re starting to see IDC make predictions that the unbounded growth that was talked about a few years ago in Linux has changed, and so as a result they see a flattening. And part of the reason for that is because we’re focusing on areas that really inside of Windows Server we weren’t addressing the needs that Linux was satisfying. I’m going to cover that in just a second, particularly if you talk about a thing called high performance computing.

Two other important things, and that is that the world of servers is being commoditized. Over the last 10 years, there’s been a 277-fold increase in the amount of performance of a machine of a similar price, 277 times more performance, and at the same time the average cost per transaction has gone down to be 1/20th of the cost of that transaction. In fact, at the launch of SQL Server 2005, and Visual Studio 2005, back in November, it was very important milestone for Microsoft, because it was the first time, ever, that every single mainframe manufacturer was demonstrating mainframe-class hardware with mainframe performance running Windows Server and SQL Server. Many of them were running 64-bit, the transition over to 64-bit has been very dramatic.

On the bottom right-hand side, you can see in 2003 only one percent of servers sold were 64-bit. By the end of 2005, it was 59 percent. By the end of this year, it will be almost impossible for you to buy a 32-bit server. And you’ll see that that movement over to 64-bit, and the movement over to multi-core processors with AMD and Intel, are both driving very, very hard.

You’ll see that there’s been an acceleration over the next two years of Moore’s Law on the server side. What does that mean? It means that there is no longer any solution that Microsoft cannot address in terms of scalability. And because of the advances that we’re making in our core platform, it means that we’re also adding the reliability, the availability and the security that are required in the most mission critical environments.

And the way in which we do this is when we say Windows Server, in fact, Windows Server is a family of products. When we do the R&D for Windows, we actually separate out into 21 different workloads, and we make sure that the product is optimized for each of those different scenarios. So, for example, in the enterprise, we make sure that we have 64-bit Enterprise Edition that can provide the highest degrees of scalability. In Windows Server 2003 R2 we launched in the last six months, we had new capabilities for branch scenarios making it much more efficient. And, in fact, building on the capability that we have with that, I’m very pleased to announce a special promotion at the Partner conference today where we’ll provide Windows Server 2003 R2 combined with ISA Server 2004, and ISA Server 2006, and choose which one of those that you’d like, plus Virtual Server, and the Systems Center Management License, and that will be available as a promotional offer for a 10 percent discount off of buying those individual things. So, not only do we have the branch capability in Windows, but by combining these things together, it provides the solution that you can offer discounts to your customers.

High Performance Computing

Another example of innovation that we’re doing in Window Server is high performance computing. Today, this represents around about 10 percent of all the servers sold in unit volume. And what they do is, they address the need in certain verticals, for example in automotive for crash testing, or in oil and gas to be able to do seismic calculations, or in financial services doing very high-demand compute calculations, things like bond prices, people want to assemble a number of different servers together to create a very high performance computer, a scale out computer.

Traditionally, we haven’t really addressed that. We have a new version of Windows that was made available about six weeks ago called the Microsoft Windows Compute Cluster Server 2003. And what this does is, it has the ability to communicate and to coordinate between different processes in a very highly scalable way. And this gives you the opportunity to start addressing a new market, a new market that actually has really only been addressed by Linux. It turns out that 40 percent of all Linux units are sold in compute clusters, 40 percent. And we haven’t been addressing that market, which is one of the reasons why Linux has been growing.

Well, we’re going to go and take that back. We’re going to go and take that share back. We think that today we have around about 6 percent of high performance computing, and we’re going to dramatically change that with this product, and the tools that we’re putting behind that. So, that’s a big opportunity for you. This sector of the market is growing faster overall than the total size of the market, and the technology that is used is going to become more important as really being more parallel is the way in which we make servers more powerful in the future.

Windows Small Business Server 2003 R2

And then, the final thing that I would highlight in terms of Windows Server is the Small Business Server R2 launch. Yesterday was the official launch date of Windows Server 2003 R2 that Steve talked about. It really provides a whole new set of capabilities for you to make sure that your machines are up to date. We’ll do a demonstration of this at the 11:30 session in Room 157 if you haven’t seen it. For those people that are focused in on small business, we also have a day beginning on Monday to enable you to see the product first of all.

This is a massive opportunity. There are 21 million more businesses today that have a network with multiple PCs but no server. And we’ve seen dramatic growth in the introduction of Small Business Server. One of the ways that we want to enable you to get a fast start is, if you go to a Web site called www.weartowin.com and you answer the simple questions that are on there, so do that today, and if you go to the booth and you’ll get a T-shirt at the WearToWin booth in the Small Business Server area of the expo. If you wear the shirt tonight to the expo, and we’ll give you $700 worth of Small Business Server that you can just take away with you and resell straight from this conference. So, we want to make you successful, and your sale is 100 percent margin on us if you go through to that Web site and fill out the form.

In fact, to help you, to give a little bit of a glimpse of some of the things you might do, and you might figure out the answers, although it’s not really that complicated, we thought we’d put a little video together about what it’s like with Small Business Server.

(Video segment.)

Managing IT Complexity

So let’s go through our four promises that we have to IT professionals and developers. The first one, you may remember, is about managing complexity to achieve agility. It’s about taking cost out and automating how the system is run inside of an organization. The key thing here is a thing called the Dynamic Systems Initiative. This is a roadmap that actually impacts all of Microsoft products, right across the range of Dynamics through to Office, through to Vista and beyond.

One of the key elements is what we’re doing with management tools, and here Microsoft has a very unique way of working. It’s knowledge-driven management tools. Here our management tool has the intelligence to understand the different applications, the operating systems on the network and how they should function. It captures a thing called a desired configuration, held in a thing called software models, or the System Definition Model. And the management rules enable the IT department to set very high-level policies, so that they make sure things are always up to date, patches happen and even can go through and dynamically add new resources and capabilities required to meet those policies.

For example, in the future you’ll be able to set a policy that says you want all of your orders to be processed at 3:00 in the afternoon, knowing that if you don’t do that, that your orders won’t ship and be with your customers the following day. If the system needs to bring on more resources in order to do that, it will just do it automatically. If you have a problem on the system and it needs fixing, it will have the knowledge about how to go through and fix that, or it will alert an IT professional, telling them what it is that they would need to do. We deliver this through a family of different products under the System Center brand, and I’ll explain about that more in just a second.

Designing for Operation

The second feature is to make sure that all of our products are designed for operation. For example, the next version of Exchange, the way it integrates very, very closely with Operations Management and System Center, makes it the natural way in which you want to manage your total environment. And even our developer tools make it such that solutions that you develop can also be part of the total management that people will do in their networks.

Virtual Infrastructure

Then the final piece of the pie is a virtual infrastructure. This is where we use virtual machines, virtual applications, we have virtual storage and a variety of different technical applications that will coming out a technical roadmap that will be coming out over the next year to two years. Already today in virtualization we have Virtual Server, that is available free of charge, so it’s priced to sell. And you can just download it straight from Microsoft.com.

We will in the “Longhorn” Server have a thing called the Windows Hypervisor, that will be part of the Windows virtualization, and we’ll have new management tools that will automatically enable you to convert physical machines to virtual machines, and will enable you to dynamically manage all of the virtual machines you have in your network. If you come along to the session at 11:30 in room 157, we’ll actually show you a demo of “Longhorn” Server and the new management tools that will do exactly that.

In order to make this work we also changed all of our licensing, to make it much more easy for customers and for you to resell into a virtual environment. One of the things I’m very excited about to announce today is that with the introduction of Windows Server 2003 R2 Datacenter Edition, this is a new edition of Windows Server that is sort of built on all the capabilities of the Enterprise Edition, except that it can give you the right to run an unlimited number of virtual machines on each processor that you deploy. So what happens is that if you have a data center, you just count the number of processors that you have in your data center, and that’s how many processors of data center edition that you need to purchase. Then you can run whatever you like on that.

So we support Linux running as a guest inside of our virtualization environment. We worked very hard to make sure that we offer the correct support for that, and you’ll see some announcements that we’re going to make, and you’ll see some announcements we’re going to make that are very, very high performance for a variety of different operating systems inside of our virtual environment. So this will be available through volume licensing for the first time, and enable you to have a very, very low cost way that you can license your customers, that’s very simple for them to go through and understand. So hopefully that will be very well received by you and your customers.

In terms of these management tools this is really a watershed year for us. Today we have Microsoft Operations Manager, affectionately known as MOM, a Systems Management Server known as SMS, and we have a thing called System Center Data Protection Manager which does backup, to be able to backup to disk. Over the next 12 months we’ll have a whole family of products that we’re calling System Center. So MOM is going to be renamed System Center Operations Manager, SMS is going to be renamed to be System Center Configuration Manager, and we’re adding to that with a variety of different solutions.

System Center Essentials

We will show demonstrations again in the 11:30 session in room 157, but one of the new products that we have here is System Center Essentials. This is a very exciting development that will ship at the beginning of next calendar year, or towards the end of this calendar year, sort of around that time. And what it is, think of it as kind of being a combination of Operations Manager, and Systems Management Server combined together for medium sized businesses. Then what we’ve also done is made sure that that integrates with Microsoft Operations Manager so that you can start to offer remote management to a variety of medium businesses, so that you can monitor their networks for them, offer those services, and really change the way in which your business works.

So what I’d like to do is I’d like to ask Tom Keane to come up to give you a demo of System Center Essentials, and how that integrates with Operations Manager. So please welcome Tom. (Applause.)

TOM KEANE:Hi, Andy, how are you?

So to highlight some of the work that we’re doing to reduce complexity, I’m going to walk you through a demonstration of System Center Essentials, a new systems management product that we’re building for medium sized businesses. Now, because System Center Essentials is designed for medium-sized businesses, we’ve made it easy to use and comprehensive. Inside our single console here I can perform all of my change and configuration monitoring and reporting needs.

To begin with, I could perform simple actions, such as troubleshooting end user computers. I can perform more advanced tasks, such as deploying software. In my organization we’ve just decided to deploy Windows Defender out to all of our client computers, to make sure that they’re secure. Using System Center Essentials, I simply browse to that file that I downloaded from Microsoft, I provide a description for our end users, and then System Center Essentials takes care of the rest.

Now, it’s worth noting that under the covers here we’re actually building on some of those Microsoft products that you may already be familiar with, such as System Center Change and Configuration Manager, and Windows Server Update Services. Now, once that wizard is complete, the only thing that I need to do is pick the computers and the groups that I’d like to install that software on, and then I’m ready to go.

With our Defender deployment underway, one of the other applications that you’ll notice that we’re deploying is Microsoft Office 2003. I want to make sure that as all of my end user systems get Office 2003, that they’re immediately secure and up to date. In our update space here we have a summary of all of the updates that are being installed by System Center Essentials.

If we come into our service packs node, I specifically want to make sure that all of my client computers get that latest service pack from Microsoft. I can filter down the list, and we’ll see here that Service Pack 2 is the one that I’ve approved for all my clients, and I’m installing.

By simply bringing up our deployment status report, I get a list of all the computers that have successfully installed, those that are in the process of being installed, and any installations that have failed. So if there are computers that need my attention, System Center Essentials is telling me about it.

Now, Andy, as an IT administrator, I want to make sure that I know about problems before my end users do. And System Center Essentials includes a full range of monitoring capabilities for my clients, servers, and network devices. You can see here that we’ve got an alert, which is a problem that System Center essentials has detected with one of my servers. If we open it up in a new Windows, you can see that System Center Essentials is not just telling us about problems, it’s actually providing us with knowledge as to how to fix them. So we have here a summary of the problems, some of the causes for why it may have occurred, and we’ve even got resolution steps, with a link to a task that I can just click to go ahead and fix that problem straight away.

Operations Manager 2007

Andy, one of the things that we’ve heard a lot from partners is the ability to deliver remote management services. You’ll see here in our diagram that at each of our customer sites we’ve installed System Center Essentials, that’s providing the change and configuration, monitoring, and reporting capabilities that you just saw. At our service provider site I’ve installed Operations Manager 2007, and that’s providing me with a single, aggregated view of all of my customers. System Center Essentials then communicates out over the Internet, without the need for an expensive or complicated VPN solution, to Operations Manager that gives me that single view.

So let’s flip back to the demo and take a look at the experience of service providers in Operations Manager 2007. So you see here that we have a list of all of the customers that we’re managing. And in my case here I’m managing about 60 different customers at remote locations. I can see information about these customers, for example, where they’re located, this customer is located here in Boston, as well as their primary contact information. And what I can also start to do is customize this information.

For example, my business may provide different service levels to my customers. In this case, here I’ve named my service levels gold, silver and bronze based on what my customers expect from me. A different way that we can actually look at our service levels is through a topology. I’ve got my gold, silver and bronze customers. I can then expand out and take a look at all of my different silver customers. We can see them here in our list, and what we can also see is our Contoso customer is red, as we saw in our other dashboard. If we go ahead we can use our problem path feature. What this feature is doing is showing me not just the customer that’s red, but the individual computer, and the role that that computer is running at the customer site. We can see here that Contoso SQL has an alert, and it needs our attention. So by pivoting from that computer we can go ahead and open up the alert.

What you’ll notice here, Andy, is this is that same alert that we saw in System Center Essentials just a couple of minutes ago. That alert has been forwarded over the Internet to Operations Manager 2007, just like we would in System Center, I can go ahead and run the task to fix the problem. What’s significant about this is not that we’re running a task to successfully fix the problem, it is that we’re running a task through System Center Essentials, on the other side of the Internet to fix a problem. So I’ve been able to go ahead and fix a problem with a remote customer without even leaving my business, or without even changing consoles.

Finally, as a service provider I’m now doing all this great work, and I want to make sure that my customers know about it. One of the ways that System Center Essentials helps you highlight this value that you’re providing is through reports. If we come back to our dashboard we can select our Contoso customer, and we can actually start to run up some reports, like our availability report. So this report is showing me all of the customers that I’m managing and how available they are. So I can start to answer questions like, have I met my service levels.

What I can also do is then drill in on this customer, and take a look at a report that I may send this customer each month that explains exactly what I’ve done for them, how up to date I’ve kept their business, any software that I’ve deployed, and all of the problems that I’ve fixed.

So, Andy, that’s just a quick demonstration of some of the things that we’re working on. Customers and partners can register for our beta right now up at www.microsoft.com/sce/. Thank you.

ANDY LEES: Thanks very much. (Applause.)

This really does provide a very good way for medium businesses, in order to manage their networks, but it also provides you a lot of opportunity. Opportunity for the way in which you can install System Center Essentials in all of those medium businesses, but also how you can provide remote managed services on a monthly billing basis in order to help the customer out, and also give you consistent revenue.

What I’d actually like to do is introduce Bob Longo from ClearPointe, who is a partner here in the United States who has gone through and already changed his business model for his business to be able to offer these types of services. So let’s hear his story. Please welcome Bob Longo. (Applause.)

BOB LONGO: Hi, Andy.

ANDY LEES: Hey, Bob, how are you?

BOB LONGO: I’m doing great, thanks. It’s an honor to be here.

ANDY LEES: Great. So exactly what does ClearPointe do?

BOB LONGO: We’re a Microsoft gold partner and we offer managed services to the SMB [Small and Medium Business] market.

ANDY LEES: Great, and how long have you been doing that?

BOB LONGO: We’ve been doing managed services about six years now. We started when our company was on the brink of disaster.

ANDY LEES: Disaster, that doesn’t sound good. What was that about?

BOB LONGO: Well, we either had to die, or change our business model.

ANDY LEES: Die doesn’t sound so good. So what does change your business model

BOB LONGO: Well, we invested in people and technology to build a managed service offering for the SMB market that made sense. We had to find a good value proposition to the SMB market.

ANDY LEES: OK. So exactly what tools are you using, and what are you doing?

BOB LONGO: Well, we started with MOM 2000 and MOM 2005, and we created a hosted configuration model, where the MOM agents were reporting into our 24/7 network operations center, and we were collecting that data, and we added a lot of third party tools, and some customizations to offer that end-to-end solution.

ANDY LEES: I see, so you have a network operations center that’s monitoring the businesses of the customers that you have, is that right?

ANDY LEES: Correct, and we’ve actually started offering that now to channel partners, in the spirit of coopetition, going to the market quicker with other partners to deliver an all-inclusive solution. Many partners, standing up their own NOC is a big proposition. So partnering together, through the spirit of coopetition, has really helped us reach out to the marketplace.

ANDY LEES: OK. What sort of customers are using this then?

BOB LONGO: Well, one of our channel partners has a small business server client, Russell and Lamay Plumbing and Heating, so a Small Business Server with three users. Now, approaching them with an enterprise-level management software package just didn’t make sense, but approaching them with a 24/7 network management service, $800 a month, that was a no-brainer for them.

ANDY LEES: Wow, $800 a month. So what difference has that made for your business then?

BOB LONGO: It’s been phenomenal. January 2nd this year we were able to book 87 percent of our revenue, everything was already set for the year. If we don’t sell another thing this year we’ll have a 24 percent increase.

ANDY LEES: Wow, so you see that this notion of offering solutions, but also following up with remote managed services is a good opportunity?

BOB LONGO: Absolutely, with the building of SCE and Ops Management, now we’re able to take enterprise-level management software to the smallest of clients. So it really opens up a tremendous opportunity for partners.

ANDY LEES: Great. Well, thanks very much for telling us your story.

Thanks very much to, Bob Longo. (Applause.)

So the first promise shows you lots of opportunity. In terms of our management business, in 2005 we moved up from being the number eight player to being the number five player, according to IDC. We’re the fastest growing of the top nine management vendors. It’s a more than half-a-billion dollar business for Microsoft. It is growing into double digits, and with the announcement of all of the System Center Edition products, things like System Center Essentials, we see nothing but opportunity in what is a $9 billion market in terms of management services.

Protecting Information

The second area is the promise of helping customers protect information, and yet providing controlled access is nothing but opportunity as far as Microsoft goes. Historically, we’ve been helping customers make sure that their environment is secure. Helping make sure that our technology is secure in the way it’s been developed, and the way in which it’s designed, and also in deployment, providing you with the guidance and tools to help your customers make sure their Microsoft environment is secure. But, now we’re going to change the rules and go after a security product portfolio for the first time.

In many respects it starts with two things.

Today we have ISA Server, which helps you on the edge, and we have Antigen, which we purchased from a company called Sabari, when we purchased the company. We’re going to significantly expand that, build on those two important building blocks to offer a whole range of security solutions called Forefront, and as part of the process we’ll even be renaming Antigen to become Forefront Security for Exchange, and Forefront Security for SharePoint, and Forefront Security for Live Communication Server. Just think of this as us offering anti-virus, anti-malware, so that you can on every single PC offer a Microsoft solution for security, for anti-virus and anti-malware, on every single machine.

On every single server managed, checking the server applications, we want to make sure that Exchange and all of the data in the Exchange database, and the messages that are moving around inside of the networks are already clean from viruses and malicious software. And even on the edge, and into the network, with Exchange hosted services we can offer a service to our customers, and to our mutual customers that filters all of the e-mails, 92 percent of the e-mail that arrive into Microsoft is spam, can you believe that, 92 percent. So in our DMV [Dynamic Management View] we have a whole set of servers that are just cleaning that.

Well, we see that a lot of other customers are in that same situation, so by offering Exchange hosted services, then we filter all of the e-mail, we use the total volume of e-mail that Microsoft sees, including things like Hotmail, to spot patterns for spam and viruses and shut them down before they ever get into the network inside of a company. So this movement over towards you’ll see this product come out over the next 12 months, by this time, the partner conference next year, everything you see on the top plane here will be available. So it’s a very exciting year for us with security products.

We’ll be demonstrating them again at 11:30 in room 157, so please take a look at that.

The other thing I want to say is that these security products are built to integrate into the existing Microsoft environment. So in terms of using identity management, and things like RMS [Windows Server 2003 Rights Management Services], for rights management, and Active Directory, that comes naturally. We’ll be using the System Center family of products so that you’ll get your alerts for security in just the same way that you’ve seen demonstrated. You’ll get alerts for everything on your network, including security. So having them integrated together is a very, very powerful proposition. Even making sure that we integrate with SharePoint, we integrate with Exchange, and the other server applications is another important, unique benefit that we can provide with solutions from Microsoft, which has been asked for a lot from our customers.

One of the things that we think, therefore, is this is a massive opportunity, and an opportunity in which we’re going to ask you to place your bets, place your bets whether you want to work with Microsoft in this new area. It’s an $11 billion market, $11 billion market and will grow to $20 billion by 2009, according to IDC. In many respects this is ground floor for the way in which we’re working together. These new Forefront products are going to come out, as I said, over the next 12 months, and if you’re currently working with Exchange, it’s a great opportunity for you to offer secured Exchange services. If you’re offering SharePoint, you’ll want to offer secure SharePoint services. If you’re working with Windows, whether that’s on the client side with Vista in the future, or with Windows Server, you want to help a customer be secure.

In fact, in the Microsoft Certified Partner, the security solutions competency is actually the fastest growing Microsoft Partner competency, but believe you me, there’s a lot more that we need to make sure that your experts are trained up on our technology and certified, so that we can go to this market together and really take that by storm.

One of the things that we want to do to help kick start that, we’re going to make sure that purchasing our security solutions is real simple, and given the way that things are resold we know that sometimes it can be difficult for you as a service provider to make margin. So we’re going to provide additional margins for security solutions that you sell. So if you are part of actually putting the solution together, even if you don’t do the transaction, we will offer you sort of a rebate or a fee, for each security solution that you have helped deploy. For the first seven months, if you resell, there will be additional benefits as part of this software advisor program. So we’ll be sending you more details of that. But, that’s an announcement I’m making today to make it more profitable for you to get in this business right from the get go.

Advancing the Business

Our third promise is all about advancing the business with IT solutions. This is around building line-of-business solutions. Whether you are an ISV or whether you are somebody that offers custom solutions or just doing customizations, this is about us providing you the right tools, and helping you to go to market, and for you to be successful. Here we see that there are some core capabilities that are required to be successful.

First of all, the infrastructure that you need to be built on has to have the lowest cost, and be secure. I think I’ve already covered that, but it’s an important point to say how integrated these are. The building block above that is data management layer. This is where SQL Server 2005 is absolutely taking the market by storm. This has been a phenomenally successful product, and I want to thank you for your help with the launch of that. Sanjay is going to cover a little bit more of the detail of what we did together there. SQL Server, we have it’s a $10 billion market, we have about 20 percent of the market in terms of revenue in 2005, and as I said, that’s growing very, very rapidly.

The thing above that is moving to a service-oriented architecture (SOA), and a business process abstraction. This, in many respects, is the promised land of code reuse, and agile development. Here we had massive success with .NET to provide you the tools, particularly using Visual Studio, and Visual Studio Team System that you can build upon in order to offer solutions around .NET. Building on top of that we have the business intelligence tools, business intelligence tools that not only build upon SQL, but given what we’re offering as part of the Office 2007 wave, the business intelligence tools and scorecard managers that provide, enabling you to help your customers make better decisions faster.

The User Experience: Making Employees More Productive

Then finally user experience. We appreciate that you are going to want to create solutions that enable a variety of different user experiences. User experiences, whether they be on mobile phones, whether they be rich Web experiences, or whether they be rich client experiences, that may look and feel like Office as part of a competent application. As part of our portfolio we provide building blocks so that you can create all those solutions as quickly and easily as possible, with one set of development tools that work right the way across the at, and they interoperate with systems that customers already have, or maybe their suppliers already have in the way in which they do integrate together.

The building blocks here are really very simple. It is things like SQL, BizTalk, and Windows on the server side, particularly enhanced with SharePoint as part of the Office 2007 wave. Building on Dynamics, and packaged and custom applications, things that you can build with the development tools, and on the client side there is a particularly important step forward, and in Office 2007 and Windows Mobile. One set of management tools to the right, and one set of development tools to the left, and this really provides a set of building blocks for you to be able to create the solutions.

Steve Guggenheimer is going to give you demos about how all of these work together. So, if you’re in the platform business, in the ISV business, please go to his session at 11:30, and it’s inside of the Grand Ballroom at 11:30. You’ll see lots of demos of new technology, and he’ll talk concretely about the opportunity for you.

Here we have a massive momentum. We sell more databases than IBM and Oracle combined, and yet as I mentioned a moment ago, we’re only 20 percent of the market in terms of revenue, lots of opportunity. Why is there that disparity? Is that disparity because we’re too cheap? Maybe. But we’re good value is the way in which I like to see that. That’s part of our value proposition to customers.

The momentum that we have around .NET really is phenomenal. Look at that chart showing 2002 to 2006, people are developing middleware solutions, designing on Java versus .NET. Java here includes all flavors of Java and J2EE combined, including WebSphere, and BEA, and Oracle, and all that stuff added together, and you’ll see that today, in 2006, the data has just come out, 60 percent of developers are designing and developing for .NET versus Java and J2EE. And the momentum that we have on BizTalk, BizTalk is now by far and away the most popular integration server. It doesn’t have the most revenue, but it has the most units associated with it because it’s a core building block in this SOA world to integrate systems together and orchestrate how processes happen inside of your customers’ organizations.

One of the things that’s been very popular since the launch of SQL Server 2005 is the migration program, and there’s been a lot of interest from people wanting to move over from Oracle to SQL Server 2005. And we’re on a bit of a roll here, so we’ve decided that we’re going to extend the promotion that we had at launch, so it’s extended right away through June 30, 2007. We have specific migration tools, it enables you to point at an Oracle database and it will help you migrate that over to SQL Server, it will give you advice as to how to do that very quickly, and very easily. We even have new tools that enable you to point at a Sybase database, and it will tell you what you need to do to migrate technically to migrate those things over to SQL Server 2005, and discounts, up to 50 percent discounts, on people moving over from Oracle to SQL Server. So, is that going to be useful to you? (Applause.)

So, lots of opportunity around that. And, as I said, Steve Guggenheimer is going to go through that in the Ballroom at 11:30, and really providing you the building blocks as ISVs, and customer solution designers, and designers of systems integrators to put together the solutions for your customers.

The final piece of the pie is about amplifying the impact that IT can make for their people inside of their organization. Here, really, we’ve done a lot of work this year around the launch of Office 2007 and Vista. We realize that the role of IT here is changing. It needs to empower these people to live this new world of work, to have anywhere access to their information, and that creates a lot of demands on IT. They need to have the infrastructure in place in order that they can go through and support that, and make the deployment of those solutions as easy as possible, making sure that the network management is done, making sure that the identity management. You saw the great things that were demonstrated yesterday with unified communications, and voice over IP, and presence, and things, all of that is built on Active Directory. And it’s no accident that Active Directory is also exactly the same thing that is used in order to provide core networking, and rights management.

So, the way in which all of this is integrated together from an infrastructure perspective really allows you to provide lots of value to your customers. So, lots of opportunity with all of this technology coming out over the next 6 to 12 months, so sort of a big kahuna of technology that in many respects could be frightening for IT. But, because of the way we’ve put the building blocks together, it enables you to make those IT and development teams be successful to help their employees have more productivity.

So, in summary then, if you look across our four promises, it’s very simple to understand. We have unique offerings, and this perhaps more than any other year in Microsoft’s history you saw the momentum that we have in terms of revenue at the very beginning of my talk, and you saw that the growth that we have for every one dollar that we make, you make six dollars. We’re exclusively relying on partners. We have lots of technology that’s going to enable you to be successful through our management tools, through security, and across the application platform. It’s been great working with you over the last 12 months, and we’re looking forward to working with you in the future. Thanks very much. (Applause.)